Data as Fuel and Analytics as Engine of Digital Transformation

(Big) Data as the Fuel and
Analytics as the Engine of the
Digital Transformation
Prof. Dr. Diego Kuonen, CStat PStat CSci
Statoo Consulting, Berne, Switzerland
@DiegoKuonen + kuonen@statoo.com + www.statoo.info
March 15, 2018

About myself (about.me/DiegoKuonen)
PhD in Statistics, Swiss Federal Institute of Technology (EPFL), Lausanne, Switzerland.
MSc in Mathematics, EPFL, Lausanne, Switzerland.
• CStat (‘Chartered Statistician’), Royal Statistical Society, UK.
• PStat (‘Accredited Professional Statistician’), American Statistical Association, USA.
• CSci (‘Chartered Scientist’), Science Council, UK.
• Elected Member, International Statistical Institute, NL.
• Senior Member, American Society for Quality, USA.
• President of the Swiss Statistical Society (2009-2015).
Founder, CEO & CAO, Statoo Consulting, Switzerland (since 2001).
Professor of Data Science, Research Center for Statistics (RCS), Geneva School of Economics
and Management (GSEM), University of Geneva, Switzerland (since 2016).
Founding Director of GSEM’s new MSc in Business Analytics program (started fall 2017).
Principal Scientific and Strategic Big Data Analytics Advisor for the Directorate and Board of
Management, Swiss Federal Statistical Office (FSO), Neuchâtel, Switzerland (since 2016).
Copyright c 2001–2018, Statoo Consulting, Switzerland. All rights reserved.
2

About Statoo Consulting (www.statoo.info)
• Founded Statoo Consulting in 2001.
2018 − 2001 = 17 + .
• Statoo Consulting is a software-vendor independent Swiss consulting ﬁrm
specialised in statistical consulting and training, data analysis, data mining
(data science) and big data analytics services.
• Statoo Consulting oﬀers consulting and training in statistical thinking, statistics,
data mining and big data analytics in English, French and German.
Are you drowning in uncertainty and starving for knowledge?
Have you ever been Statooed?

Contents
Contents 6
1. Demystifying the ‘big data’ hype 8
2. Demystifying the ‘Internet of things’ hype 16
3. Demystifying the two approaches of analytics 19
4. Demystifying the ‘machine intelligence and learning’ hype 29
Conclusion, principles for success and related ‘digital skills’ 38
6

‘Data is arguably the most important natural
resource of this century. ... Big data is big news just
about everywhere you go these days. Here in Texas,
everything is big, so we just call it data.’
Michael Dell, 2014
7

1. Demystifying the ‘big data’ hype
• ‘Big data’ have hit the business, government and scientific sectors.
The term ‘big data’ — coined in 1997 by two researchers at the NASA — has
acquired the trappings of religion.
• But, what exactly are ‘big data’?
The term ‘big data’ applies to an accumulation of data that can not be
processed or handled using traditional data management processes or tools.
Big data are a data management infrastructure which should ensure that the
underlying hardware, software and architecture have the ability to enable ‘learning
from data’ or ‘making sense out of data’, i.e. ‘analytics’ ( ‘data-driven decision
making’).
8

• The following characteristics — ‘the four Vs’ — provide a definition:
– ‘Volume’ : ‘data at rest’, i.e. the amount of data ( ‘data explosion problem’),
with respect to the number of observations ( ‘size’ of the data), but also with
respect to the number of variables ( ‘dimensionality’ of the data);
– ‘Variety’ : ‘data in many forms’, ‘mixed data’ or ‘broad data’, i.e. different
types of data (e.g. structured, semi-structured and unstructured, e.g. log files,
text, web or multimedia data such as images, videos, audio), data sources (e.g.
internal, external, open, public), data resolutions (e.g. measurement scales and
aggregation levels) and data granularities;
– ‘Velocity’ : ‘data in motion’ or ‘fast data’, i.e. the speed by which data are
generated and need to be handled (e.g. streaming data from devices, machines,
sensors, drones and social data);
9

– ‘Veracity’ : ‘data in doubt’ or ‘trust in data’, i.e. the varying levels of noise and
processing errors, including the reliability (‘quality over time’), capability and
validity of the data.
• The most important issue is ‘veracity’ and the related data quality !
Indeed, big data come with the data quality and data governance challenges of
‘small’ data along with new challenges of its own!
Existing ‘small’ data quality frameworks need to be extended, i.e. augmented!
10

11

Big data in 1939
Source: ‘The history of the Tube in pictures’ (goo.gl/dmJymR).
Criticism of sceptics: these four Vs have always been there! But, what is new?
12

‘Data is part of Switzerland’s infrastructure, such as
road, railways and power networks, and is of great
value. The government and the economy are obliged
to generate added value from these data.’
digitalswitzerland, November 22, 2016
Source: digitalswitzerland’s ‘Digital Manifesto for Switzerland’ (digitalswitzerland.com).
The 5th V of big data: ‘Value’ , i.e. the ‘usefulness of data’.
13

Intermediate summary: the ‘ﬁve Vs’ of (big) data
‘Volume’, ‘Variety’ and ‘Velocity’ are the ‘essential’ characteristics of (big) data;
‘Veracity’ and ‘Value’ are the ‘qualiﬁcation for use’ characteristics of (big) data.
14

15

2. Demystifying the ‘Internet of things’ hype
• The term ‘Internet of Things’ (IoT) — coined in 1999 by the technologist Kevin
Ashton — starts acquiring the trappings of a ‘new religion’!
Source: Christer Bodell, ‘SAS Institute and IoT’, May 30, 2017 (goo.gl/cVYCKJ).
However, IoT is about data, not things!
16

The ‘ﬁve Vs’ of IoT (data)
‘Volume’, ‘Variety’ and ‘Velocity’ are the ‘essential’ characteristics of IoT (data);
‘Veracity’ and ‘Value’ are the ‘qualiﬁcation for use’ characteristics of IoT (data).
17

‘Data are not taken for museum purposes; they are
taken as a basis for doing something. If nothing is to
be done with the data, then there is no use in
collecting any. The ultimate purpose of taking data
is to provide a basis for action or a recommendation
for action.’
W. Edwards Deming, 1942
Data are the fuel and analytics is the engine of the digital transformation
and the related ‘data revolution’!
18

3. Demystifying the two approaches of analytics
Statistics, data science and their connection
Statistics traditionally is concerned with analysing primary (e.g. experimental
or ‘made’ or ‘designed’) data that have been collected (and designed) to explain
and check the validity of specific existing ‘ideas’ (‘hypotheses’), i.e. through the
operationalisation of theoretical concepts.
Primary analytics or top-down (i.e. explanatory and confirmatory) analytics.
‘Idea (hypothesis) evaluation or testing’ .
Analytics’ paradigm: ‘deductive reasoning’ as ‘idea (theory) ﬁrst’.
19

‘Without theory, experience has no meaning.
Without theory, one has no questions to ask. Hence
without theory, there is no learning.’
20

Data science — a rebranding of ‘data mining’ and as a term coined in 1997 by a
statistician — on the other hand, typically is concerned with analysing secondary
(e.g. observational or ‘found’ or ‘organic’) data that have been collected (and
designed) for other reasons (and often not ‘under control’ or
without supervision of the investigator) to create new ideas (hypotheses or
theories).
Secondary analytics or bottom-up (i.e. exploratory and predictive) analytics.
‘Idea (hypothesis) generation’ .
Analytics’ paradigm: ‘inductive reasoning’ as ‘data ﬁrst’.
21

‘Neither exploratory nor confirmatory is sufficient
alone. To try to replace either by the other is
madness. We need them both.’
John W. Tukey, 1980
22

• The two approaches of analytics, i.e. deductive and inductive reasoning, are
complementary and should proceed iteratively and side by side in order to enable
data-driven decision making and proper continuous improvement.
The inductive–deductive reasoning cycle:
Source: Box, G. E. P. (1976). Science and statistics. Journal of the American Statistical Association, 71, 791–799.
23

Do not forget the term ‘science’ in ‘data science’!
24

Questions analytics tries to answer
Source: Jean-Francois Puget, Chief Architect, IBM Analytics Solutions, September 21, 2015 (goo.gl/Vl4l2d).
25

Data-driven decision making : refers to the practice of basing decisions on the
analysis of data, rather than purely on gut feeling and intuition:
Mute the HIPPOs (after having listened carefully to their opinions)!
26

27

‘Machine learning has tremendous potential to
transform companies, but in practice it is mostly far
more mundane than robot drivers and chefs. Think
of it simply as a branch of statistics, designed for a
world of big data.’
Mike Yeomans, July 7, 2015
Source: Yeomans. M. (2015). What every manager should know about machine learning.
Harvard Business Review (goo.gl/BfAWVN).
28

4. Demystifying the ‘machine intelligence and learning’ hype
John McCarthy, one of the founders of ‘Artificial Intelligence’ (AI) (now
sometimes referred to as ‘machine intelligence’) research, defined in 1956 the field
of AI as ‘getting a computer to do things which, when done by people, are said to
involve intelligence’, e.g. visual perception, speech recognition, language translation
and visual translation.
AI is about (smart) machines capable of performing tasks normally performed by
humans ( ‘learning machines’), i.e. ‘making machines smart’.
29

In 1959, Arthur Samuel deﬁned ‘Machine Learning’ (ML) as one part of a larger
AI framework ‘that gives computers the ability to learn’.
ML explores the study and construction of algorithms that can learn from and
make predictions on data, i.e. ‘prediction making’ through the use of computers.
30

‘In short, the biggest difference between AI then and
now is that the necessary computational capacity,
raw volumes of data, and processing speed are readily
available so the technology can really shine.’
Kris Hammond, September 14, 2015
Source: Kris Hammond, ‘Why artiﬁcial intelligence is succeeding: then and now’,
Computerworld, September 14, 2015 (goo.gl/Q3giSn).
31

Source: ‘Historical cost of computer memory and storage’ (hblok.net/blog/storage/).
32

• Most of the recent progress in machine learning involves mapping from a set of
inputs to a set of outputs.
Some examples of such ‘supervised (machine) learning systems’:
Source: Brynjolfsson, E. & McAfee, A. (2017). The business of artiﬁcial intelligence: what it can — and
can not — do for your organization. Harvard Business Review, Digital Article, July 2017.
33

An example of a machine learning workﬂow
Monitoring and using the resulting feedback are at the core of machine learning.
Implementation requires the automation of the monitoring step and the feedback
ingestion step. Assuming this is done, we have a ‘learning machine’.
Source: Jean-Francois Puget, Chief Architect, IBM Analytics Solutions, ‘Machine learning
algorithm = learning machine’, April 27, 2016 (goo.gl/7nK4pR).
34

• However, without humans as a guide, current AI is no more capable than a computer
without software!
‘Business is not chess; smart machines alone can not
win the game for you. The best that they can do for
you is to augment the strengths of your people.’
Thomas H. Davenport, August 12, 2015
35

36

• The largest and most basic ‘need’ in the analytics hierarchy is the need for a
‘strong’ data collection (goo.gl/pVYXmj):
Data should be treated as a key strategic asset, so ensuring their veracity
and the related data quality become imperative!
37

Conclusion, principles for success and related ‘digital skills’
• In a world of (big) data and IoT (data), the veracity of data, i.e. the trustworthiness
of data, including the related data quality, is more important than ever!
38

• The key elements for a successful analytics future are statistical principles and rigour
of humans!
• Analytics is an aid to thinking and not replacements for it!
• Data and analytics should be envisaged to complement and augment humans, not
replacements for it!
Nowadays, with the digital transformation and the related ‘data revolution’,
humans need to augment their strengths to become more ‘powerful’: by
automating any routinisable work and by focusing on their core competences.
39

‘By ‘augmenting human intellect’ we mean increasing
the capability of a man to approach a complex
problem situation, to gain comprehension to suit his
particular needs, and to derive solutions to problems.’
Douglas C. Engelbart, 1962
Source: Engelbart, D. C. (1962). ‘Augmenting human intellect: a conceptual framework’ (1962paper.org).
40

Technology is not the real challenge of the digital transformation!
Digital is not about the technologies (which change too quickly)!
41

‘Digital strategies ... go beyond the technologies
themselves. ... They target improvements in
innovation, decision making and, ultimately,
transforming how the business works.’
Gerald C. Kane, Doug Palmer, Anh N. Phillips, David Kiron and Natasha Buckley, 2015
Source: Kane, G. C., Palmer, D., Phillips, A. N., Kiron, D. & Buckley, N. (2015). Strategy, not technology,
drives digital transformation. MIT Sloan Management Review (goo.gl/Dkb96o).
42

My key principles for analytics’ success
• Do not neglect the following four principles that ensure successful outcomes:
– use of sequential approaches to problem solving and improvement, as studies
are rarely completed with a single data set but typically require the sequential
analysis of several data sets over time;
– having a strategy for the project and for the conduct of the data analysis;
including thought about the ‘business’ objectives ( ‘strategic thinking’ );
– carefully considering data quality and assessing the ‘data pedigree’ before,
during and after the data analysis; and
– applying sound subject matter knowledge (‘domain knowledge’ or ‘business
knowledge’, i.e. knowing the ‘business’ context, process and problem to which
analytics will be applied), which should be used to help deﬁne the problem, to
assess the data pedigree, to guide data analysis and to interpret the results.
43

‘The transformation can only be accomplished by
man, not by hardware (computers, gadgets,
automation, new machinery). A company can not
buy its way into quality.’
44

‘Digital skills’ — ‘Hard and soft skills to work with data’
Source: European Commission, Open Data Maturity in Europe 2016, Figure 32, October 2016 (goo.gl/WPHR54).
45

46

Available at goo.gl/tW85FP in English, German, French and Italian.
47

‘We can not solve problems by using the same kind
of thinking we used when we created them.’
Albert Einstein
48

‘The only person who likes change is a wet baby.’
Mark Twain
49

‘It is not necessary to change. Survival is not
mandatory.’
W. Edwards Deming
Another version by W. Edwards Deming: ‘Survival is not compulsory.
Improvement is not compulsory. But improvement is necessary for survival.’
50

‘All improvement takes place project by project and
in no other way.’
Joseph M. Juran, 1989
51

52

‘It is getting better. . . A little better all the time.’
The Beatles, 1967
53

54

Have you been Statooed?
Prof. Dr. Diego Kuonen, CStat PStat CSci
Statoo Consulting
Morgenstrasse 129
3018 Berne
Switzerland
email kuonen@statoo.com
@DiegoKuonen
web www.statoo.info

Copyright c 2001–2018 by Statoo Consulting, Switzerland. All rights reserved.
No part of this presentation may be reprinted, reproduced, stored in, or introduced
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written permission of Statoo Consulting, Switzerland.
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Trademarks: Statoo is a registered trademark of Statoo Consulting, Switzerland.
Other product names, company names, marks, logos and symbols referenced herein
may be trademarks or registered trademarks of their respective owners.
Presentation code: ‘AdNovum/Workshop.2018’.
Typesetting: LATEX, version 2 . PDF producer: pdfTEX, version 3.141592-1.40.3-2.2 (Web2C 7.5.6).
Compilation date: 15.03.2018.

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